Shanghai lockdown tests 'zero-COVID' limits, shakes markets

BEIJING (AP) — A two-phase lockdown of Shanghai’s 26 million people is testing the limits of China’s hard-line “zero-COVID” strategy, which is shaking markets far beyond the country’s borders.

China’s largest city on Tuesday entered the second day of the lockdown’s first phase, which encompasses the Pudong financial district and adjacent areas on the east side of the Huangpu river that divides the center of finance, manufacturing and trade.

With public transport suspended and bridges and tunnels connecting the two sides of the city closed, usually bustling city streets — including the fabled riverside Bund in Puxi with its century-old historic buildings — were unusually quiet.

Zhang Meisha, a 39-year-old freelancer taking a morning jog along the Bund, said she was trying to get as much sunshine as possible before Puxi goes under lockdown.

“I hope the Shanghai spring can wait for us,” Zhang said.

The shutdown adds to anxiety in financial markets over Russia’s war on Ukraine, the Federal Reserve’s effort to cool surging inflation by raising interest rates and other economic challenges.

Market reactions including Monday’s 7% drop in oil prices in London don’t reflect the “true reality of the situation,” but investors already were uneasy about China and the global economy, said Michael Every of Rabobank.

“We have a whole mountain of problems to worry about, and this is just one foothill among many,” said Every. “If that’s all it is, a COVID lockdown, it’s not difficult to look in recent history books and see how it plays out. But this interfaces with a lot of other issues.”

The new omicron BA.2 subvariant is widely blamed for bringing a new surge in cases to Shanghai, which had suffered relatively little effect from the...